Nearly 78% of Advisors to Shift Toward Fee-Based Services by 2026
By 2026, over three-quarters of the wealth management industry—77.6%, to be exact—is projected to adopt a fee-based model, a jump of more than five percentage points from 2024. This shift is largely fueled by a move from traditional commissions to asset-based fees within wirehouse and broker/dealer (B/D) channels, as outlined in the latest Cerulli Edge—Americas Asset and Wealth Management Edition report.
For financial advisors, asset-based fees are the go-to structure, comprising 72.4% of their compensation. On the flip side, commission-based revenue has shrunk to just 23% of an average advisor’s income, with expectations of further declines in the coming years. While fee-based pricing is popular with many clients, advisors are diversifying their offerings with alternative fee models to cater to a broad spectrum of investors, regardless of asset size.
“While asset-based fees are on the rise, they are not suitable in every situation,” said Andrew Blake, associate director. “Alternative fee structures, such as annual or hourly fees, can provide greater flexibility in client service and a competitive advantage for firms in the fee-based business model.”
Beyond flexibility, alternative fee structures—paired with the ability to bundle planning services—help advisors stand out and attract clients. About 21% of advisors charge separately for financial plans, drawing a portion of their revenue from these fees, making it the most prevalent nontraditional arrangement. While only 3% of wirehouse advisors tap into this revenue stream, the numbers climb to 38% in the insurance B/D channel and 35% in the independent B/D channel.
With rising demand for holistic financial planning, Cerulli advises practices to rethink how they price services beyond basic investment management. “A divide exists between practices that include financial planning in their advisory fees and those that charge separate fees,” added Blake.
“Advisors must be clear and concise about pricing structure and options to engage with this clientele, who may need clarification on what an advisory relationship entails. Open and candid discussions about the cost of services will build trust and strengthen relationships between clients and advisors while attracting prospective clients willing to pay for advice.”